Weekly Outlook: Data Runs Full For the Australian Dollar

Fri Jun 02 21:09:00 GMT 2006

by
Richard Lee

With
consumer spending beginning to suffer, the service sector may see a less
positive report during May – although most likely remaining in expansionary
territory.Inflationary numbers
also come out on Monday with the TD Securities reading.April saw prices rise 0.4 percent from
March, 2.8 percent from April 2005. As much of the rise was due to record level
oil prices during the month, May should not see quite as drastic a rise, but the
numbers may not be any more comforting for the already unsteady economy.Continuing with the news, ANZ job
advertisements for May will be released.The number of newspaper ads dropped by 5 percent during April, however
there was a marked rise in Internet job ads.As Internet ads become more popular,
this indicator becomes less telling, but a slow down in the employment market
would be bad news for the Aussie as the currency teeters on a fine balance
between good and bad news.Less job
opportunities would create further uncertainty in consumers and more softening
in consumer spending.Lastly on
Monday are the releases of company operating profit and inventories in the first
quarter of 2006.In the last
quarter of the year, a traditionally very profitable quarter for retailers
especially, company profits rose less than expected as consumer spending slowed
drastically.As consumer spending
has continued to slow, these numbers look to again disappoint.Tuesday is shaping up to be a slightly
calmer day as the RBA is holding its policy-making meeting for an announcement
due the next day, which could keep traders tense.Home loan data for April should be
telling for the RBA as high borrowing costs may be cooling the housing market
and keeping consumers from taking on mortgages.During March, there was a rise of 0.7
percent however spurring speculation that the housing market slow down was
over.Information on the affects of
the higher interest rate will also be seen in the investment lending release,
which may not see as heavy growth during April as the 2.5 percent seen during
March due to people becoming more cautious as their budgets are squeezed.The first quarter current account
deficit looks to have shrunk after posting at A$14447 million in the fourth
quarter of 2005.Imports have
dropped off a bit during the first quarter as the Australian population seems to
be saving more and shedding some of its traditionally credit dependant
tendencies.Thursday, the RBA will
announce its policy decision.Policy makers raised the rate 25 basis points to 5.75 percent at last
month’s meeting to cool inflation indicating that another rate hike would be
unlikely.It is widely expected
that the RBA will keep the current rate however it is not clear that inflation
has been tamed.The Australian
economy over the past month has been on a seesaw of good and bad releases
though, and a rate hike would probably be nothing but detrimental.After the rate announcement, first
quarter GDP growth will be released.Year on year growth in the fourth quarter was 2.7 percent whereas
expectations for 2006 fall at 3 percent.Strong GDP growth would be encouraging to consumers whose sentiment seems
to still be damaged.Finally on
Friday, Australia
releases its employment numbers.Unemployment is currently at 5.1 percent, seeing a drop in employment
during April.The trend seems to be
steady full time employment with large swings in part time and seasonal
employment figures.Preliminary
surveys indicate that these numbers improved slightly during May, hopefully
strengthening consumer sentiment.

The
Aussie began last week with a steady Monday, trading within a 20-pip band from
0.7579 to 0.7590, without any news.The next day, retail sales for April rose by 1.4 percent exceeding
expectations of a 0.3 percent rise.At the same time as this Aussie-positive news, building approvals were
released to have dropped 3.4 percent from March to April, racking up a 7.5
percent drop from April 2005.With
the conflicting simultaneous reports the Aussie first dropped off about 10 pips
but almost immediately jumped up 80 pips.Markets decided to concentrate on the more positive retail data as,
despite the drop in approvals, the housing data was reported to contain some
signs of recovery.However the next
day was a bit of a roller coaster ride bouncing as traders attempted to decide
how to interpret the news and with hope that the next days releases would clear
things up.Wednesday again however
brought conflicting signals.The
release of trade data showed a greater than expected contraction of the trade
deficit to A$1093 million in April with a rise in both imports and exports.Construction work done in the first
quarter grew by 0.2 percent, 0.7 percent less than expected.The rise was from a large amount of work
done in the public sector, which masked a large drop in the private and
residential sectors.The underlying
breakdown of the release shows a softening in the construction sector, possibly
signaling continued softening in the housing market.Private sector credit grew more than
expected by 1.3 percent in April up to an 18 month high.

Date

Event

GMT

EST

Consensus

Previous

June
4

AiG
Performance of Service Index (MAY)

23:30

19:30

--

56.3

June
4

TD
Securities Inflation (MoM%) (MAY)

0:00

20:00

--

0.4%

June
4

TD
Securities Inflation (YoY%) (MAY)

0:00

20:00

--

2.8%

June
4

Australian
May Job Advertisements

1:30

21:30

June
4

ANZ
Job Advertisements (MAY)

1:30

21:30

--

-
5.0%

June
4

Company
Operating Profit (QoQ%) (1Q)

1:30

21:30

--

--

June
4

Inventories
(1Q)

1:30

21:30

--

--

June
5

Reserve
Bank June Policy-Setting Meeting

June
5

Home
Loans (APR)

1:30

21:30

--

0.7%

June
5

Current
Account Deficit (1Q)

1:30

21:30

--

-
14447M

June
5

Investment
Lending (APR)

1:30

21:30

--

2.5%

June
5

RBA
Cash Target (JUN)

23:30

19:30

--

5.75%

June
6

Cashcard
May Retail Index

June
6

Gross
Domestic Product (QoQ) (1Q)

1:30

21:30

--

0.50%

June
6

Gross
Domestic Product (YoY) (1Q)

1:30

21:30

--

2.70%

June
7

Unemployment
Rate (MAY)

1:30

21:30

--

5.1%

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